Just a few years back, barely a handful of chief digital officers existed worldwide. Today, the CDO tribe numbers in the thousands, making it one of the fastest-growing C-suite roles. Yet, many CDOs are failing, or at least not succeeding.
Over the last few years, many companies have appointed a technology-savvy executive as its CDO to lead a firmwide digital transformation. The CDO is tasked with strategically renewing and growing the enterprise through new digital business models, technologies, and simplified processes to ensure that it does not merely survive but thrives in the digital age. In theory, the latest addition to the C-suite is effectively meant to be a Renaissance Leader who will secure the company’s future by continually revitalizing its business through digital transformation.
In reality, the new CDO has often struggled to find adequate funding or in attracting digital talent to legacy companies and gets mired in organizational dynamics. After a few years, the value creation initially envisaged via digital transformation (see figure 1) remains elusive, while investments mount. The CEO or the company board runs out of patience, and the CDO position is looked at with a lot more skepticism than potential.
Why CDOs Fail to Deliver
There are five key reasons why CDOs fail to become successful Renaissance Leaders. Interestingly, these reasons are often deep-rooted in the rest of the organization, rather than emanating from the CDO her-(him)self.
First, an absence of clear, firmwide ambition and direction-setting by the CEO or company board results in different business groups pursuing various digital initiatives. There is no playbook to guide the transformation, and often there is a limited focus on value creation. Everyone in the organization wants to do digital; however, he or she does not know why or have a financial outcome linked to it.
Second, the lack of change in organizational thinking and ways of working means companies continue to operate in silos, and digital transformation is viewed as yet another function rather than an overarching goal.
Third, a lack of buy-in on digitalization and data by business leaders and functional heads makes aligning stakeholders daunting.
Fourth, there is an over-reliance on outsourcing, rather than the development of internal capabilities needed to bring about the innovations required for value creation.
The last challenge relates to the CDOs' backgrounds. The smartest and savviest of CDOs from the technology world have not seen or navigated large complex organizations that move at a completely different pace. What a tech company or a start-up can achieve in 6-12 weeks can often take 6-12 months in complex organizations.
Such CDOs are often overwhelmed by the bureaucratic structure of legacy companies that requires jumping through hoops for approvals, aligning business stakeholders, and getting internal teams energized. It is not uncommon to see CDOs return to their comfort zone in the technology world sooner than later.
A Renaissance Leader is Not a Superhero
The CDO is not a superhero who can do everything digital singlehandedly. Renaissance Leaders require organizational support to succeed.
Currently, CDOs spend most of their time aligning and educating business stakeholders, followed by hiring and developing digital talent and shaping partnerships (see figure 2). Only a small part goes to generating new ideas and problem solving, among others.
Establishing a distributed digital framework backed by all business leaders is essential for organizational transformation to succeed. Companies must identify digital domains within which each business leader defines the required objectives and technological innovations. These could range from boosting sales productivity to improving customer experience and engagement, and pricing, among others. Business leaders must also help by contributing the right resources and drive internal adoption in their business areas, while the CDO helps set up the frameworks, platforms, and technology partnerships required to make the digital transformation successful.
A distributed digital framework will enable the CDO to focus on marshaling resources and creating the right building blocks (and platforms), to implement the digital vision for the company.
How the CDO Role is Evolving (or Dissolving)
The CDO role combines various C-suite skillsets. The task of overseeing change management and adoption effectively makes the CDO the chief transformation officer, though the converse is also true. The importance of data use cases and of creating data platforms and data culture within organizations converges with the chief data officer role.
It’s not surprising, therefore, that the CDO role is changing in ways that reflect the sweep of its functions. Three broad trends can be seen.
CEOs themselves or chief transformation officers are taking on the CDO role. For example, several automotive companies are setting up new digital business units (e.g., related to software or connected cars) where the CEO carries out the CDO role to marry the business disruption with digital solutions. Existing transformation officers can be seen doing the same in process-intensive industries like insurance and medical devices, where technology-enabled simplification is needed to futureproof operating models.
In several regions (for example, Western Europe), the CDO role is being dissolved and being taken over by business or functional heads. Especially in industries such as industrial goods, heavy machinery, and automotive, where R&D and product functions are the core drivers, and digital technologies are becoming connected to the core of the business. Some major German automobile or technology companies, for example, no longer have independent CDOs.
Independent CDOs are still crucial for customer-centric industries such as retail, telecommunications, and other services, as well as at legacy companies that have not yet become customer-focused. Here the CDO typically comes from the outside and challenges the current processes. In some cases (for example, in the U.S.), companies in industries as diverse as retail, jewelry, and mass media have even hired or promoted the CDOs as their CEOs.
A Jack of All Trades
How the role is evolving highlights various approaches that companies are taking to address the challenges of digital transformations. They also spotlight the cross-functional nature of this Renaissance Leadership role, which requires a Jack of All Trades who can inspire people and companies to reinvent themselves.
The CDO role is not just about technology but about organizational transformation. It requires a technology-savvy all-rounder with a multidimensional approach to business and mastery over the intricate art of stakeholder management— to inspire diverse groups of people to take change-oriented action.
A.T. Kearney’s partner, Varun Arora, and principal, Kaushik Sriram, wrote this article.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends.